XCHRX LUI PO NAM t/a SHUNYI CO. v. CENTURY REGAL LTD.

HCA 9587/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9587 OF 1999

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J U D G M E N T

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1. This is an appeal from the order of Master Christie made on 7 December 1999 whereby he ordered that the Plaintiff's summons seeking summary judgment be dismissed with costs to the Defendant and certificate for counsel.

2. The Plaintiff's claim is for the sum of $320,446.40 as set out in the amended Statement of Claim. The causes of action pleaded are for payment of goods sold to the Defendant in the sum of $320,446.40 as particularised in the amended Statement of Claim and also on 7 dishonoured cheques for the same amount of $320,446.40. The Plaintiff sought summary judgment on its claim on the cheques which were dishonoured as payment was countermanded by the Defendant, the drawer of the cheques.

3. The Defendant has filed a Defence and Counterclaim in this action. Also, prior to the institution of these proceedings the Defendant has, as Plaintiff, instituted HCA 7308 of 1999 against the Plaintiff herein as Defendant. In that action, the Defendant herein claims damages for breach of contract on the part of the Plaintiff herein for late delivery of goods and for delivering defective goods.

4. The question is whether or not the Plaintiff should be entitled to summary judgment on its claim on the dishonoured cheques. It is trite law that bills of exchange are treated as cash and, unless there are exceptional circumstances, where there is an action between the immediate parties to the bills of exchange, judgment will not be held up by virtue of a counterclaim by the Defendant and execution will not be stayed. So the fact that there is a counterclaim is no reason to deny the Plaintiff judgment. However, the Defendant seeks to raise two issues which it says are triable issues entitling it to unconditional leave to defend.

5. It is common ground that the Plaintiff is a manufacturer of garments. And at all material times fabric and materials were supplied by the Defendant to the Plaintiff for the manufacture of garments which the Defendant purchased from the Plaintiff for export and for resale. The contracts between the parties have been exhibited in evidence and they show that the usual mode of payment was by cheque 21 days after the shipment day. A condition in the contracts has also been drawn to my attention, namely, that under the conditions it was stated that the garments and fabric should satisfy "the buyer testing".

6. Apart from the contracts referred to in these proceedings there had been previous dealings between the parties where goods had been sold and delivered to the Defendant for which payments had been made. However, because of the poor payment record by the Defendant, according to the Plaintiff, the Plaintiff insisted on post-dated cheques for the total sum of $320,446.40 before actual delivery of the goods in question. On 22 March 1999, the Plaintiff and the Defendant entered into an agreement in Chinese which provided, inter alia, that post-dated cheques should be issued by the Defendant for the delivery of goods. That is the subject matter of the 7 cheques in this action claimed by the Plaintiff. Also, it is set out in the Chinese agreement that the goods had to be examined, checked and accepted by the quality controllers of the Defendant before delivery. After delivery, the Defendant should not deduct payment and the Plaintiff should not be responsible for any liability for the same. This was an alteration of the original contract terms whereby it was stated that the garment and fabric should satisfy the buyer testing.

7. The defences that have been raised are two:

1) That the cheques would be delivered to the Plaintiff on condition that the goods to be supplied would be of merchantable quality. That is the first defence raised, that there was a conditional delivery of the cheques.

2) The second defence raised was that of duress, namely, that the Defendant was under duress when it issued the cheques to the Plaintiff and handed the same to the Plaintiff.

8. The evidence in support of these defences is set out in the affirmation of Mr Leung Ping Fai of the Defendant. In paragraph 21, he states, inter alia:

"the said cheques were made on condition that the Plaintiff would deliver the goods of merchantable quality. The cheques were issued under the pressure of the Plaintiff".

No particulars are provided as to the person by whom this condition was imposed. No particulars are provided as to whom pressure was applied by the Plaintiff. Mr Leung Ping Fai does not condescend upon particulars and it is the Defendant's obligation to do so where it seeks to raise a triable issue.

9. The second affirmation of Mr Leung Ping Fai suggests that only Miss Fiona Chung was available on 22 March 1999 and she is the person who signed the Chinese agreement on behalf of the Defendant. Mr Leung Ping Fai does not say anywhere in his affirmation that he has been informed by Miss Fiona Chung of any of the matters that he asserts.

10. Quite apart from that, dealing with the 'conditional delivery' defence raised, I have been referred by counsel for the Plaintiff to the case of Great Sincere Trading Co. Ltd. v. Swee Hong & Co. [1968] HKLR 660. It was held there that a written contract was created on the giving of the unconditional order for payment expressed by the cheque itself and oral evidence was inadmissible to vary or contradict its terms.

11. In this case, the cheques, copies of which have been produced in evidence, show that they are to be paid on 11 April 1999. The written documents are unconditional and based on the authority of Great Sincere Trading Co. Ltd. v. Swee Hong & Co., (supra) the oral alleged condition would be inadmissible to vary or contradict the terms of the written contract expressed by the cheque itself. I am not satisfied that the Defendant has raised a triable issue on the ground that the delivery of the cheques were conditional.

12. I turn to duress. It is clear that duress, whatever form it takes, is a coercion of the will so as to vitiate consent (Pao On v. Lau Yiu Long [1980] AC 614 at p. 635.) As I have said, the particulars that have been provided in the affirmations are lacking in that they failed to particularise to whom the pressure was applied.

13. There are also unsatisfactory features in the Defendant's evidence. One of these is the assertion that there was a condition that the Plaintiff would deliver the goods of merchantable quality when the cheques were issued and delivered to the Plaintiff. If the Defendant was able to impose that condition, it is difficult to see how it could be seriously suggested that the Defendant did not voluntarily issue the cheques but was coerced into issuing the cheques. Another unsatisfactory feature is what is stated in paragraph 3 of the second affirmation of Mr Leung Ping Fai of the Defendant. He alleges therein that quality reports signed by the Defendant's staff although stated to be acceptable was:

"due to the pressure and threat of the Plaintiff as stated in my previous affirmation, the Defendant had no alternatives but to state in the quality reports that the goods are acceptable".

This is unbelievable as the only pressure and threat of the Plaintiff stated in his previous affirmation was one that was made on 22 March 1999. The reports referred to in paragraph 3 of the second affirmation were all pre-22 March 1999 reports.

14. In view of the unsatisfactory state of the Defendant's evidence, it seems to me that this is a case where the court would be inclined to say that this case is almost one in which summary judgment should be ordered. This is a case that I think it is proper to impose a condition of payment into court the full amount claimed for giving leave to the Defendant to defend this action on the cheques claim.

15. In the circumstances, the appeal is allowed and I will impose a condition that the Defendant pay into court the sum of $320,446.40. I would like to hear counsel as to the time for payment in.

16. [After hearing submissions]

17. The order I make is that the appeal is allowed. The Defendant be granted leave to defend on condition that the Defendant do pay into court within 28 days from today the sum of $320,446.40 and in default of payment there be judgment for the Plaintiff in the sum of $320,446.40 with costs. Costs of the hearing before Master Christie to be costs in the cause with certificate for counsel. The costs of the appeal to be costs in the cause.